Why You Need An Innovation Portfolio

Mike Maddock
, ContributorI write about innovation and solving problems with disruptive ideas.Opinions expressed by Forbes Contributors are their own.

A Billion-Dollar Lesson From An Unlikely Suspect

As the financial markets crashed, CNBC's Erin Burnett and the late Mark Haines pressed me during Squawk Box to name a sector that would benefit immediately from focusing on innovation.

Financial services, I responded without hesitation.

Since the interview, the world has seen a plethora of new financial services and insurance businesses, models, products and services all fueled by the democratization of capital and information.

What's perhaps most interesting about the re-energized sector is that it has used a staple of financial planning to get dramatically better.

Employed correctly, it will impact the future of your company with terrific results as well.

I'll explain.

When it comes to how you divvy up your personal investments, you have always been told that they should be spread among asset classes (stocks, bonds and cash) and then diversify further within the classes themselves. For example, you might hold stocks in both foreign companies and domestic ones, enterprises with large and small market capitalization, retailers and high-tech companies.

The idea is to capture all the potential gains out there—the more bets you place, the greater the chances you have of being right—while minimizing risk.

Like many of the leading innovators today, you could and should use exactly the same "portfolio" approach when it comes to innovation.

The Four Classes Of Innovation

So how would you divvy up your innovation portfolio? You have four choices.

I will list them and characterize what is good, bad and ugly about each.

1. Evolutionary Innovation. (It is technically easy for us to do and we know our customer wants it.)

Included here are changes to pricing, simple line extensions and making small incremental changes to existing products and services.